The current market sentiment is somewhat delicate.

On one hand, there are voices saying: "The Bank of Japan's rate hike has long been digested by the market, and the impact won't be too significant."

On the other hand, the Bank of Japan itself is sending out different signals — 0.75% is far from the end, and 1% or even higher could be considered low, which is not the true neutral interest rate level.

Here is a key understanding: The macro events that can truly shake the market are never just a single "first move," but rather the moment when the direction is clearly confirmed.

This time, the Bank of Japan has given an extremely clear signal — the era of ultra-loose monetary policy spanning 30 years is officially coming to an end.

**Let's look at the facts first**

The overnight rate has been raised to 0.75%, the highest level since 1995. The Policy Board has reached a consensus, with the market implied probability of a rate hike reaching as high as 95%.

But more importantly, the attitude of the central bank. Internal assessments believe that 0.75% is not enough, and it may need to be pushed to 1% or even higher.

In other words: this is not a test, but a clear announcement of a new path.

**The real issue is not inflation itself**

Many people are still using old thinking: "Japan has no inflation pressure, so why raise rates?"

The reality is not like that. Japan's wage growth has exceeded expectations multiple times, the stickiness of core inflation has become apparent, companies are shifting from passive cost increases to proactive price hikes, and inflation expectations are gradually becoming endogenous.

This means Japan is facing not just short-term price fluctuations, but a true positive cycle of "wage increases → inflation rises → central bank tightening" — which is the scenario the central bank fears the most.